Economists Say the Funniest Things
posted by Dave Hoffman
These scorching days inspire writing about firefighters. In Montana, Senator Burns is under fire for having attacked a local brigade. And in Dallas, W. Michael Cox, chief economist for the Federal Reserve Bank of Dallas, is in a bit of hot water for commenting on a study that found that the middle-class is being priced out of urban life. Cox said (to the NYT):
Of course, cities need police officers, firefighters, teachers. But as long as they can get the labor they need from somewhere nearby, some economists say, middle-class shrinkage may not hurt. In Southern California, developers import construction workers from Las Vegas and put them up in hotels; costs go up but rich clients can pay. Firefighters who want to live in high-priced cities can work two jobs, said [Cox.] “I think it’s great,” he said. “It gives you portfolio diversification in your income.” Pay for essential workers like plumbers and cabdrivers will tend to go up, he said.
Cox has an optics issue here, but he’s also missing the point. Economically diverse neighborhoods, the argument goes, are a type of a public good. Believing that individuals will “pay” for that good through double-employment is foolish.
August 1, 2006 at 11:44 am
Posted in: Economic Analysis of Law
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Responses (4)
Daniel J. Solove - August 1, 2006 at 1:26 pm
“In Montana, Senator Burns is under fire for having attacked a local brigade.”
Oh, the puns in this sentence! “Under fire” is a nice deliberate pun, but the name of the senator is quite fitting too.
Dave Hoffman - August 1, 2006 at 1:28 pm
It took hours to come up with that sentence. I’m happy you appreciated it!
Paul Gowder - August 2, 2006 at 10:11 am
Also, lets not forget the staggering public costs of commuting. Pricing the middle class out of the cities creates environmental externalities, congestion externalities, etc. etc.
(I also love the pun madness.)
Frank Pasquale - August 2, 2006 at 1:26 pm
I think the economist’s complacency here is pretty tiresome. Is it so hard to recognize that inequality has costs?
Here’s an interesting hypothetical: why not make every service based on ability to pay? why not ration every pleasant detail of daily living with as fine a grain as possible to squeeze micropayments out of those who, say, want to be assured a clear sidewalk? an empty subway car? a parking space close to the store?
Consider this quote from a J. Dupuit, in Boyle’s essay on price discrimination:
“It is not because of the few thousand francs which would have to be spent to put a
roof over the third-class carriages or to upholster the third-class seats that some
company or other has open carriages with wooden benches ….What the company
is trying to do is to prevent the passengers who can pay the second-class fare from
travelling third class; it hits the poor, not because it wants to hurt them, but to
frighten the rich . . . . And it is again for the same reason that the companies,
having proved almost cruel to third-class passengers and mean to the second-class
ones, become lavish in dealing with first-class passengers. Having refused the poor
what is necessary, they give the rich what is superfluous.”
In other words, the rationing mechanism of price is quite a bit more manipulable and clumsy than the scalpel assured us by latter-day Hayekians.
As for the public good of mixing classes: I think Mickey Kaus’s book The End of Equality makes many good points on that score. Posner has a complacent blog post that purports to minimize the problems of inequality, and a 1998 paper that supposedly does the same, but I don’t really feel a need to argue with someone who’s recently made this point:
“[In ideal estate tax policy,] [t]he question would then be whether the taxpayers or the Gates foundation would spend the money more efficiently. I believe the taxpayers would. The foundation is an inherently inefficient allocative institution because, much like the government, it is not subject to market tests. There is no way to assess the value of the Gates foundation’s expenditures because the foundation is not competing in any product or capital market. (Colleges and most other recipients of charitable gifts, in contrast, compete in product markets.) Gates and Buffett are extremely able businessmen but the Gates foundation is engaged in activities, such as fighting Third World diseases, that are remote from their business experience.”
from
http://www.becker-posner-blog.com/archives/2006/07/the_gates_found.html
ah, the inherent inefficiency of the Beatitudes!
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